Corporations | Partnerships | Limited Liability Companies


At some point, most entrepreneurs and small business owners consider establishing a business entity, such as a corporation, partnership or limited liability company (LLC). What really are the benefits? What are the drawbacks? And is it worth the trouble?

The answer depends on your unique circumstances. We can help you select the best type of business entity to meet your goals, prepare the documentation to establish the entity and define the relationships among management, investors, and others, prepare maintenance and compliance documentation as your business grows, and provide succession planning to help you turn over the business to succeeding generations or buyers.

To learn about the pros and cons of different types of business entities, click here.
To learn about our services for entity formation, click here.
To learn about our services for entity maintenance and compliance, click here.
To learn about our succession planning services, click here.
To learn about our business acquisition and sale services, click here.

Which Business Entity Is Right for You?

You may have been told by your CPA that you should incorporate, or perhaps you are interested in incorporating because some of your competitors have done so. But is a corporation really the right type of entity for you? The choice of business entity depends on legal, income tax and operational considerations. We can help you plan for and structure the type of entity that best meets your needs.

You may have heard that by forming a business entity you can reduce your taxes or limit your liability, but misperceptions are common in this area. While you may realize some modest income tax savings and succeed in limiting your personal liability to some extent, often the greatest benefits from forming a business entity are continuity of management and control, and increased access to capital.

Continuity of Management and Control. Because an entity is its own "person," it can continue its existence and activities regardless of what happens to you. For example, if you should become incapacitated or die, a formal system of organization will provide for the smooth transfer of control to a successor. Business activities will continue uninterrupted, without loss of income or other disruption.

Increased Access to Capital. Having sufficient capital available to your business often makes the difference between success and failure. Setting up an entity for your business provides security for investors in the form of limited liability, some assurance that the business can carry on if something happens to you, and an improved ability to define relationships to maximize the goals of all and avoid disputes. It also provides the possibility of some protection to you to limit your personal liability in the event of a business failure.

Attorneys in our office collectively have over twenty-five years of experience assisting entrepreneurs as well as established businesses in setting up entities, negotiating and closing capital-raising transactions, and providing general business formation advice.

Types of entities:

• A corporation is a legal "person," distinct from the owners. Just like a real person, it has assets, liabilities and certain rights.
• A partnership means shared ownership among two or more individuals.
• A Limited Liability Company (LLC) falls in between a partnership and a corporation; its members are protected from personal liability for business debts and claims.

We can discuss with you the pros and cons of each type of entity in terms of liability, tax savings, operational and capital-raising considerations, to identify the best solution for your business. Please contact us to schedule a free consultation.

How Much Can I Really Limit My Liability?

You may have heard that as a business owner/operator, if you incorporate, your personal assets will not be at risk for liabilities stemming from the business. For instance, you may have been told that you will not be personally liable for judgments, negligence and lawsuits against the business. Unfortunately, it is not necessarily so.

Incorporating can limit your personal liability as owner/operator for your employees’ actions or liability that occurs irrespective of an individual’s negligence. Incorporating also will generally limit your investors’ personal liability for business debts. However, you remain liable for your own actions. For example, if you, as the business owner, commit a negligent act, both you and the company may be liable. Similarly, if an employee is negligent, both the employee and the company may be liable. However, you as the owner would not necessarily be personally liable for the employee’s negligent act, thus providing a measure of protection for your personal assets. As your company grows and you hire more employees, this sort or protection will become more and more important. That’s where incorporation becomes more important as you take your business to the next level of success.

How Much Can I Lower My Taxes?

You may have been told that incorporating will drastically lower your taxes. But, a corporation is not a tax shelter. You may realize modest income tax savings by being able to take additional deductions, realizing some income as profits rather than compensation (subject to FICA or self-employment taxes), and through benefits planning, such as retirement accounts. By and large, however, your decision whether or not to incorporate or form another entity should be driven by factors other than taxes.

Entity Formation

Many disagreements between business partners, principals or corporate officers and directors are the result of poor planning in the initial formation of the business entity. We can help you establish your business entity with well-considered relationships among the principals and solid documentation to prevent disputes later on.

The agreements we draft to form your entity generally try to cover all bases, including withdrawal or death of a partner, principal or shareholder. We can assist you in planning ahead and developing tight, concise arrangements that will lay a solid foundation for success and prevent disputes as your business grows. Documentation may include:

• Corporate shareholder agreements, articles of incorporation and bylaws
• LLC articles of organization and operating agreements
• Partnership agreements and certificates of partnership
• Employment agreements (important for legal and tax reasons)
• Corporate minutes of organizational meetings of the board of directors and shareholders

Please contact us for further information.

Entity Maintenance and Compliance

Now that you have formed your business entity, how are you going to find the time for the paperwork involved in maintenance and compliance?

As your business grows, you can count on our diligent help with maintenance and compliance documentation so that you can focus on growing your business, rather than maintaining it. We can guide and support you with practical advice, solutions and solid documentation that minimizes risk and optimizes your chances for success.

Business Succession Planning for Closely-held and Family Businesses

You’ve poured your heart and soul into your business and it may well be the largest asset in your portfolio. But if you were to become incapacitated or die suddenly, your entire investment of time, resources and passion could be lost if you have not planned for succession. Even if you’ve just formed your business, it’s never too early to plan for succession.
We provide full business succession planning services to prepare for the transfer of a business to other family members, succeeding generations or other parties. Proper planning will minimize estate taxes and provide for a smooth transition in ownership and control. Please contact us for assistance with the following:

• Planning for a successor you can groom to take over the business
• Coordinating the transition
• Preparing purchase and sale agreements
• Handling purchase and sale transactions

Business Acquisition and Sale Services

Are you interested in acquiring or investing in a new business? Alternatively, do you own a business which you are considering selling?

Attorneys in our office collectively bring over twenty-five years of experience in representing both buyers and sellers in merger, acquisitions and sale transactions. The decisions you will make in how you effect a purchase or sale of your business will have major ramifications. For an entrepreneur considering purchase of an existing business, the liabilities you take on, and your ability to obtain recourse from the seller, will make a significant difference in the amount of return you will realize from the business. We can assist you in structuring a purchase transaction to maximize tax advantages, minimize liabilities, and optimize your chances for success after closing.

For sellers of a business, beyond just agreeing on a sales price, the manner in which you structure the sale and the terms of the transaction can make a world of difference in the amount you actually realize for your hard years of effort and risk. We can advise you in how to structure a sale to maximize the amount you will actually realize while minimizing your ongoing risks and liabilities, and we can help you negotiate the transaction and draft agreements to help you get to a swift closing on the most advantageous terms.

Mortensen Law Office
Tax, Trust & Probate Attorneys, P.C.
22807 Lyons Avenue
Newhall, California 91321
(661) 799-8035

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